Hong Kong retail landlords struggling to lease large-sized shops

Tenants have been looking for small to medium-sized shops with lower rents.

According to the latest official figures, Hong Kong’s total retail sales value registered a slight growth of 2.9% YoY to HK$27.2 billion in July. However, compared to June sales, the value dropped by 3.2%. This may reflect the fact that consumers held off spending in July to wait for the disbursement of the government’s electronic consumption vouchers in August.

Knight Frank says both consumption sentiment and foot traffic were stimulated by the consumption vouchers when the government began to disburse them in August. “The first tranche of vouchers, worth HK$2,000, were disbursed to about 5.5 million residents, adding about HK$11 billion to consumer spending. Although part of this amount may not benefit the retail market, as it is spent on transportation and daily necessities, the programme could still have a stimulus effect by motivating people to spend more than the amount of consumption vouchers.”

Here’s more from Knight Frank:

In the retail leasing market, small to medium-sized shops with a monthly asking rent of about HK$150,000 or below saw emerging signs of demand, especially those suitable for restaurants. Landlords, especially those in prime streets, have been striving hard to lease larger vacant shops to suitable tenants. Viable options for landlords have been limited, as large-sized shops are no longer in demand by international and luxury brands with high rental affordability. 

Instead, landlords have resorted to partner with retailers who have innovative ideas, such as those that incorporate art elements, or online retailers. For example, Digital Art Fair, which focuses on immersive art, new media art and NFT Crypto Art, will take up the former Topshop flagship store on Queen’s Road Central in late September to conduct its first exhibition in Asia. 

Given the combination of upside factors, including the increasing vaccination rate, the electronic consumption voucher scheme, and the launch of the “Come2HK” and “Return2HK” quarantine-free schemes, the retail market is expected to remain stable in the fourth quarter.